Property Increase vs Inheritance Tax Liability
We are all aware of the increase in property values has increased substantially in recent times, notably during the pandemic.
Alongside the Chancellor’s spending review in November 2020, the Office for Budget Responsibility predicted that the number of estates subject to inheritance tax (IHT) was predicted to rise to 30,400 in 2020/2021, which is up from 25,200 in 2019/2020.
Whilst this may be great to the average seller, what does this actually mean for those selling a property for probate purposes, and how does this affect the beneficiaries?
Well, the current IHT threshold is £325,000 per person or £500,000 if a direct decedent (i.e. a child) is left your residence (but note that £175,000 is the maximum available).
Once you pass the thresholds, any other assets in the estate tax at 40% and the estate is liable to pay this.
With house prices on the rise, this only affects families who are already close to the threshold, who may now have been pushed over the edge.
Whilst some may say that the tax can easily be paid from the net proceeds of the property, hold your horses… because any IHT liability must be paid before Grant of Probate is issued, i.e. you cannot access those assets until the probate application has been submitted, the IHT forms submitted and, most of all, the IHT liability paid.
For those who say they can get hold of that money somehow… hold your horses, again… also note that the IHT must be paid within6 months from the end of the month in which the death occurred. If not paid, interest is payable.
Bearing in mind the delays that third party companies are experiencing due to the pandemic, does this feel fair to you? You may not be at fault for other parties delays but you still have those deadlines to watch out for.
There are ways around this. If you wish to discuss this, please contact me.
The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.
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